input credit of packing materials against tax free sale

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2009 The dealer deals in sales only Fish in local Gujarat and also Exports out side country. Fish is a tax free item under vat law applicable in Gujarat.So the dealer is not liable to pay vat tax.
Dealer purchases packing material from local dealers in gujarat and the purchase of packing material is tax paid. The vat rate is 4+1=5% vat paid by the dealer on packing material purchase and tax invoice received by the dealer.
I want to know that Can dealer claim input vat credit paid on packing material purchase in vat return?.if yes which section is applicable under the vat act in Gujarat.and can dealer claim refund of input vat from vat department.

Vishnu Saboo

Vishnu Saboo (Expert)
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01 December 2009 i don't think, it would be allowed, since final product is not taxable.

Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2009 Thanks for your reply. but i want to know that which section is applicable in this matter.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 In Gujarat VAT law, when dealing with tax-free sales and the input tax credit on purchases like packing materials, there are specific provisions to consider:

### **1. **Eligibility for Input Tax Credit (ITC):**

**Tax-Free Sales and Input Tax Credit:**
- **Tax-Free Sales:** If the dealer's sales are tax-free (like fish, which is exempt under Gujarat VAT), input VAT on purchases related to these sales generally cannot be claimed as a credit. This is because the VAT Act does not allow credit for input tax on purchases used for making exempt supplies.
- **Packing Materials:** Since packing materials are used in the process of making tax-free sales, the VAT paid on these materials typically cannot be claimed as input tax credit under normal circumstances.

### **2. **Refund of Input VAT:**

**Claiming Refund:**
- **Refund Eligibility:** If input VAT has been paid on purchases used to make tax-free sales, the dealer may be eligible for a refund of the input VAT. The VAT Act allows for a refund of the input tax if the output sales are exempt, but this is subject to the specific provisions and procedures outlined in the VAT Act.
- **Section Reference:** Under Gujarat VAT Act, **Section 54** generally deals with the refund of tax. This section allows for the refund of input tax credit in certain cases, including when the input tax pertains to exempt sales.

### **3. **Relevant Sections in Gujarat VAT Act:**

- **Section 54:** Provides the mechanism for claiming refunds, including refunds of input tax on exempt supplies.
- **Section 11:** Deals with the conditions for input tax credit and specifies the scenarios in which input tax can be claimed. It usually indicates that input tax credit is not available for purchases used to make exempt sales.

### **4. **Procedure for Claiming Refund:**

**Steps to Follow:**
- **File a Refund Application:** To claim a refund, the dealer needs to file a refund application with the VAT department, following the prescribed format and procedure.
- **Maintain Proper Documentation:** Ensure that all documentation supporting the claim, including tax invoices and proof of purchase, is maintained.

### **Summary:**

- **Input VAT Credit:** Generally, input VAT on packing materials used for tax-free sales cannot be claimed as credit.
- **Refund Claim:** The dealer can apply for a refund of input VAT paid on packing materials if the VAT Act provides for such a refund. This is typically handled under **Section 54** of the Gujarat VAT Act.

**Note:** VAT laws and their interpretations can be complex. It is advisable to consult a tax professional or legal advisor who can provide guidance based on the latest amendments and specific circumstances.